The Internet Takeover!

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Units sold online present threats, as well as opportunities

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The promises made by online retailers of HVAC equipment often entice budget-minded consumers to click the “buy” button without giving much thought to what they will do with a 2.0 ton heat pump or a 3.5 ton air conditioner when it actually arrives. It’s only as the consumers begin calling local contractors about installation that they typically pay attention to the small print on the websites—the language that may limit or even deny returns, spell out  significant restocking fees, and require consumers to deal directly with manufacturers on warranty issues.

“Selling HVAC equipment online is bad in so many ways, and the person who really gets the shaft is the homeowner,” says Karla Justice, general manager of Central Services in Herndon, VA. “The problem starts with the homeowner having to spec out his own heating and cooling system, which increases the probability that the unit will have problems. And if the unit is DOA, the consumer can’t go right back to the distributor and swap it out like I can.”

When Justice gets calls about installing customer-supplied equipment, she recommends the homeowner return the equipment immediately. If that proves impossible, the conversation promptly ends. “I have a firm policy: If I don’t supply it, I don’t install it,” says Justice. “Even if the customer-supplied equipment is a thermostat, I won’t touch it. I don’t want to install anything I can’t stand behind.”

Bill Blaze, president of Advanced Air & Refrigeration, Inc., came to a similar conclusion about two years ago. His company, based in Fort Myers, FL, used to install equipment that existing customers bought on the internet; the installation paperwork always emphasized the equipment was “as is” and therefore not under warranty.

Still, says Blaze, “It doesn’t matter how many times you say there’s no warranty. I guarantee that when the equipment fails, the customer will call you to say, ‘The manufacturer believes the failure occurred because of how you installed it.’

“These customers are typically looking for a Volkswagen price with Rolls Royce service,” he adds. Tired of investing time and money to correct problems not of his company’s making, Blaze changed his policy. “We just put our foot down and said no” to installing customer-supplied equipment, he says.

Maintaining that equipment, however, is another story. Advanced Air has no qualms about signing a maintenance contract for something it didn’t install. “Then you’re making money, because you’ll probably find things that need to be corrected to bring the unit up to where it should be for code—and you’ll have the opportunity for add-on sales,” notes Blaze.

He speculates that many homeowners who purchase units online turn to unlicensed contractors or jacks-of-all-trades with little technical experience for the installation. In fact, he recalls one homeowner announcing that an installation shouldn’t take more than 15 minutes, based on the videos available on YouTube.

What’s The Price Of Service?

Kevin Howard takes a different approach to customer-supplied equipment. “I’m happy to install it for the same price as if we would have supplied the equipment,” says the president of Howard Air. “We quote the installation price, and about half the time the people say, ‘great!’ They think they got a deal, because they don’t know what I would charge for a regular installation.”

In the Phoenix market, where Howard Air does business, mini-splits constitute the majority of equipment purchased online. Howard estimates that his company does several such installations each month, and he picks up “a fair amount” of warranty work, depending on the brand of mini-split. (Howard Air declines to install split systems purchased online— unless the customer just happens to have an EPA license for handling refrigerant.)

“With equipment supplied by the homeowner, the only warranty we provide is on our workmanship,” Howard explains. “We explain that if a warranty issue comes up with the equipment, it’s the homeowner’s responsibility to send the part back and get another in return.” In such cases, Howard estimates that one bad part could potentially translate into $300 or $400 in diagnostic fees and labor for his company. Additional revenue comes from re-installations of equipment incorrectly connected by do-it-yourselfers or hired handymen.

“Once word gets out, online equipment sales will probably decline, because the savings just aren’t there or worth the hassle for the consumer,” believes Howard. In his view, the bigger threat to HVAC contractors comes from the easy availability of parts’ pricing on the internet.

Bill Blaze concurs, noting, “Customers can look up any part online and know within five minutes how much we paid for it—and then they’ll call and want to know why we charged so much more. It’s just  another way of bid chiseling and, as contractors, we have to learn how to respond to that.”

Here are some suggestions for meeting internet-related issues head-on:

Stay above the fray.
In the past, when customers questioned Advanced Air’s prices, Blaze usually responded with a detailed explanation of his costs for doing business: salaries, insurance, uniforms, vehicles, overhead, inventory, etc. Over time he simplified his approach. “Now, I just say we charge enough to stay in business and make a profit, with no additional explanations,” says Blaze. To reduce the likelihood of price discussions occurring after work has been performed, Advanced Air asks customers to agree to a flat-rate price up front.

Go on the offensive.
For example, says Howard, “We have to educate our clients about the huge difference in quality between OEM parts from the manufacturer and cheaper parts sold online.” He often uses the analogy of automobile parts, with original replacement parts available only from a car dealer. Howard Air has also changed its invoicing format, so parts’ numbers are no longer readily available to customers.

Keep watch on the web.
Howard notifies the manufacturers he works with if he sees their equipment for sale online. “If that is how the manufacturer chooses to do business, bypassing the dealer, then we won’t continue to support that manufacturer,” he says. Howard hopes his heads-up encourages manufacturers to pay closer attention to whom is selling what on the internet

Justice would like to see HVAC manufacturers follow the lead of plumbing manufacturers who, she says, don’t hesitate to send cease-and-desist notices to online retailers featuring their products. “The HVAC manufacturing side just doesn’t do as good a job protecting their image and their brand,” she notes. “It hurts all of us in the industry to have homeowners specing out their own units. That’s bad service.”

Emphasize the differences.
Without the costs of a brick-and-mortar business, online retailers of HVAC units and parts will always in on price. So in sales presentations, blogs, FAQs, and promotional literature, play up the specialized skills and service that only your company can provide. As Justice says, “We have to change the conversation so it’s not just about how much the unit itself costs, but also about the quality and comfort we provide.”

Too many homeowners, she believes, equate HVAC equipment with home appliances, that can simply be delivered and plugged in. Contractor websites that emphasize price over technical expertise and service continue to feed that misleading mentality. “To change the mindset, we should relate HVAC to putting roofing or siding on a house,” says Justice, “because it’s a highly specialized industry and not at all like plugging in a refrigerator.”

In addition, Bill Blaze would like to see the HVAC sales process become smoother and speedier, to appeal more to consumers accustomed to quickly finding information and scheduling appointments via their computers and mobile phones. “Online sales are definitely a threat to the existing sales model,” says Blaze. “As an industry, we’ll have to move, adjust, and pay attention to what’s going on—Water or else we’ll be left in the cold.”

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Posted In: ACCA Now, Management, Sales & Marketing, Technology